UBS(US:UBS)2025-09-25 05:58Summary of Key Points from the Conference Call Industry Overview - The focus is on Emerging Markets (EM) and the rotation of global flows into EM equities and debt, with specific attention to various countries including Brazil, China, Korea, and Taiwan [2][3][4]. Core Insights 1. US Flows into EM Equities - US flows into EM equities reached $38 billion in the three months to July, marking the strongest inflow period on record. - Brazil, Hong Kong, and Taiwan saw the highest inflows, while India, ASEAN, and Mexico experienced net foreign outflows [3][4]. 2. China's Northbound Turnover - Chinese equities are experiencing record daily northbound turnover, running at 1.6 times the levels of October 2024. - Retail flows are not overheated, with margin financing at half of its 2015 peak and household deposits significantly exceeding A-share market cap [4][5]. 3. Persistent Local Investor Outflows in EM - Over the past decade, EM net portfolio flows have been dominated by local investors, with persistent outflows noted in countries like Korea, Brazil, and Chile. - Korean retail FX outflows have surged, while signs of repatriation are evident in Taiwan and Israel [5][6]. 4. Medium-Term Outlook for EM FX - The lack of portfolio flow repatriation and expectations of weaker EM trade growth may hinder EM FX strength. - A forecast of 75 basis points of Fed easing this year contrasts with the 45 basis points currently priced in [6][7]. 5. Local Debt Flows - Flows into local debt are primarily driven by higher yielders such as Brazil, Mexico, South Africa, and Hungary, with a constructive outlook on these markets [7][9]. Additional Important Insights - Valuation Context - Valuations in China remain undemanding, supporting a positive outlook for MSCI China in the EM context [4][5]. - Crowding Scores - UBS' Quant crowding scores indicate below-average positioning in several EM markets, suggesting potential for increased investment if a global equity bubble occurs [3][6]. - Foreign Holdings of Domestic Debt - Data shows varying levels of foreign holdings in domestic debt across EM countries, with Brazil and South Africa highlighted for their foreign debt holdings [40][42]. - FX Deposits Trends - FX deposits have shown resilience, with notable increases in China and Thailand, indicating a stable demand for foreign currency assets [50][56]. This summary encapsulates the key points discussed in the conference call, providing insights into the current state and outlook of emerging markets, particularly in relation to equity and debt flows.